Time to close the investment Gap



By Tom Daschle

© Copyright Agri-Pulse Communications, Inc.

 This past Saturday marked a historic day in Africa, ushering in the continent's 54th state, South Sudan. After years of unrest and genocide and an overwhelming vote in January to secede from the North, South Sudan is now an independent country. However, South Sudan, like many emerging economies around the world, faces vast challenges to put in place the building blocks of a sound and stable economy.

 As the world population booms to over 9 billion people in the coming decades, countries in the developing world, like South Sudan, will face more pressure to find ways to feed themselves.  Food shortages and spikes in food prices will continue to threaten the shaky ground developing countries already find themselves on, threatening their own stability as well as ours.

 Investment in an agricultural economy can be foundational in society, creating jobs, food and the underpinnings of a developing economy. That investment must come from all stakeholders, including government, development assistance from partner countries, research and innovation from academia, all sizes and types of farmers, and NGOs. But private sector investment is perhaps most critical to creating the kinds of sustainable solutions in developing markets to accomplish food security and to encourage growth and stability.

Globally Positioned Agriculture

 However, a recent report by the Global Harvest Initiative (GHI), a partnership among Archer Daniels Midland Company, DuPont, John Deere and Monsanto to address food security, revealed that overall foreign investment in the developing world has been on a steady decline for the past several years, namely in the agricultural sector. In 2008, agriculture program levels from all donor countries was $3.5 billion, less than half of what was invested in the mid-1980s. As countries face their own financial crises, resources continue to wane, resulting in fewer donations to neighboring countries with even less resources. 

 The GHI report, entitled Enhancing Private Sector Involvement in Agriculture and Rural Infrastructure Development, estimates the overall agriculture investment gap in developing countries at nearly $90 billion annually.

 There are three takeaway points that the GHI paper illustrates.  First, the investment gap in the developing world is significant and presents a “formidable” obstacle in the way of developing countries trying to increase their agricultural productivity.  Without the needed investments to close this gap, it will be impossible for developing countries to meet their agricultural needs and ultimately contribute to global food needs.

 Second, developing countries spend an estimated 4 percent - $696.3 billion - of their GDP on development.  As recommended by the GHI and over the years by the heads of various African countries, developing countries should allocate at least 10 percent of their GDP to agricultural development.  Such an increase in domestic investment is critical to long-term economic growth and stability and to developing countries finding ways to contribute to their own agricultural productivity. 

 Third, the GHI noted that only $48.3 billion (or 10 percent of total public and private sector support) was from direct private sector investment.  This level of private sector investment is far from enough if we are to increase agricultural productivity by the necessary 25 percent in the next 40 years to feed our population. 

 Developing countries face unique challenges that will only be exasperated by our global food demands. The private sector can play a key role in providing the kind of innovation, entrepreneurship, and creative solutions needed to increase the stability and security of our globe.

 Facilitating the needed private sector investment will require partnerships between industry, governments and other organizations. The efforts of the U.S. Agency for International Development (USAID) and this Administration's Feed the Future initiative are good examples of the needed collaborations between government and the private sector to spur investment in developing regional markets to improve agricultural productivity. Countries around the world must also work to facilitate this kind of private sector involvement by establishing strong governance, market-friendly conditions and by having sound regulatory systems.

 Closing the investment gap will help countries like South Sudan achieve their potential, and in the process, will provide the global community with a more secure future.

 
About the author: Tom Daschle works for the global law firm DLA Piper and is chair of the DuPont Advisory Committee on Agriculture Productivity and Innovation. The former lawmaker was elected to represent the state of South Dakota in the U.S House of Representatives in 1978 and served four terms. In 1986, the Aberdeen, South Dakota native was elected to the U.S. Senate, becoming minority leader in 1994 and also serving on the U.S. Senate Committee on Agriculture, Nutrition and Forestry. He served as U.S. Senate Majority Leader in 2001-2002.

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